Generation Millennial: The New Wave of Market Investors. Historically, the typical stock market investor has depicted a rich old man wearing a sports jacket in a gentleman’s club. Now we are starting to see hundreds of thousands of young people. Under the age of 25 start investing in the stock market – representing a huge shift in our investment landscape. Here’s why:
A seismic shift – out with the old, in with the new
Never have we seen such a rise in retail trading from young Australians under the age of 25. As it stands right now, nearly 435,000 Australians placed their first ‘trade’ in the stock market last year to which 20% of those were under the age of 25 and 70% of those under the age of 39. As host Andrew Baxter mentions, no longer is the stock market old. And stuffy as now it has become a fun, ‘gamified’ like exercise that has never been more appealing to young people.
With a raging property market that is realistically too expensive. To enter in most cases and the ease of online trading – young people are thriving in these conditions. Gone are the days where the stock market is only for rich, old men – what we are seeing is a new wave of investors who are young. Hungry and desperate for dollars in the market in what is the hot topic of conversation right now.
The Three Types of Investors
After doing some digging into an ASX report released in late 2020. We found that the exchange had classified three large groups of investor profiles that were making up the majority of the stock market – females, next gens and high value investors. With that, we found that the average female had an account size of approximately $90k and only took 5 trades per year at just $4k each – indicating conservatism and prudent risk management which are two of the many reasons that females make better traders than men. The growing number of females getting into the market has been a growing trend. For quite some now as the stereotypes of what is the typical ‘investor’ has been shaken off.
Looking now the higher end, more traditional part of the market being high value investors: these are people with approximately $1.2m invested at an average age of 55+. These are typically males who trade around 20 times per year and really represent the old school investor profile that most of us think of. The last group is the next gens. These are the third largest investor group who have an average age of just 21 years old. Working with a relatively small $5k average account size yet having an average $4k trade size – these are the young punters of the market making up a huge slab of the volume going through.
Why are so many young people starting to invest?
This is really the million-dollar question which can be answered in a few short responses says host Andrew Baxter – social media, gamified broking platforms and Crypto currency. All three of these elements of have peaked young people’s interest as they are constantly bombarded online by ads and ambassadors pushing their trading products. Not to mention all the talk around GameStop. And Wall St. Bets where young millennials online are making a killing.
Second that, what we also have is an environment where interest rates are so low. Thus providing no incentive to hold cash at the bank. And also a situation where the property market is so expensive that getting started is becoming too high of a hurdle for first home buyers to jump over. So where do you put your hard-earned savings to make any money? The stock market. As the hot topic of conversation, young people are now embracing investing in the stock market as they see it is fun. Easy and cheap way to gain exposure to the upside on their money. Healthy yes, however not without risk.
Young and Stupid – Mistakes the millennials are making
When you see market events like the GameStop short squeeze pumped through Reddit for example. You can’t help but worry about young people getting too far ahead of themselves or trading blind. A group of individuals manipulating markets from their bedrooms is only something that could happen with the current overdrive of social media. And functionality of gamified broking platforms like Robinhood for example. Posing a need for the regulator to catch up before any more young people think this is how investing works.
That aside, we’ve also seen monumental returns on blue chip businesses like the banks or Afterpay for example here more locally in Australia. The risk – yes, there have been many young people make a killing in what has been the strongest bull market rally in history. However, this doesn’t mean they are seasoned pros.
Getting too far ahead of yourself is something young people can often struggle with in many areas of their life. Not to mention making heaps of money in the stock market because the ball bounced your way. That $60k you made on Afterpay can become $600k down the line if you play your cards right… or $6k if you don’t.
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Getting started the right way
For any young millennials reading this blog post not yet invested in the stock market – here is your calling. We know there are plenty of distractions in your early years that are easier to undertake yet nowhere near as constructive, however our advice is to simply get started.
In this respect you are better of just jumping in rather than giving yourself a 23-point check list before you do. It’s never been easier to make money in this market, however it’s never been easier to lose either. Our recommendation – invest in yourself and learn how to make money from the stock market from someone who’s been doing it for as long as you’ve been alive. Check out Australian Investment Education to learn more.
